Municipal Advisors Fined for Off-Channel Communications Violations

Twelve municipal advisors settled separate SEC enforcement actions for supervisory failures and record keeping violations concerning off-channel communications.

According to the Orders, the firms' personnel sent and received messages via text messages ("off-channel communications") relating to municipal advisory activities. The SEC found that the off-channel communications were sent and received through firm-issued devices, and that the firms did not maintain or preserve records of these written communications. The SEC found that the firms' failures involved employees at various levels of authority, including both municipal advisor representatives and municipal advisor principals.

The SEC found that the firms violated Exchange Act Sections 17(a) ("Records and Reports") and 15B(c)(1) ("Municipal securities") and Rule 15Ba1-8 ("Books and records to be made and maintained by municipal advisors") thereunder; and MSRB Rules G-8 ("Books and Records to be Made by Municipal Securities Dealers and Municipal Advisors"), G-9 ("Preservation of Records") and G-44 ("Supervisory and Compliance Obligations of Municipal Advisors").

To settle the charges, the firms respectively agreed to (i) cease and desist from causing future violations; (ii) a censure; and (iii) civil money penalties ranging from $40,000 to $324,000.